If you are thinking of strategy, where do you start? In the “C” of Strategy I wrote about the many different options that we have when starting on the strategy journey — “There are basically three Cs that matter — Capabilities, Customers and _Competitors (_more broadly the environment a.k.a Porters five forces)”. I concluded that a few large organisations like Apple and all the lean startups of the world start with Customers. Everyone has to start with customers, especially if you are focussed on social change. Rita McGrath in her book “The End of Competitive Advantage”.
“Arenas are characterized by particular connections between customers and solutions, not by the conventional description of offerings that are near substitutes for one another… The driver of categorization will in all likelihood be the outcomes that particular customers seek (‘jobs to be done’) and the alternative ways those outcomes might be met. This is vital, because the most substantial threats to a given advantage are likely to arise from a peripheral or nonobvious location.”
“The arena concept also suggests that conventional ideas about what creates a long-lived advantage will change. Product features, new technologies, and the ‘better mousetrap’ sorts of sources of advantage are proving to be less durable than we once thought. Instead, companies are learning to leverage more ephemeral things such as deep customer relationships and the ability to design irreplaceable experiences across multiple arenas. They will be focused on creating capabilities and skills that will be relevant to whatever arenas they happen to find themselves operating in. And they may even be more relaxed about traditional protections and barriers to entry, because competition will devolve around highly intangible and emotional factors.”
I like the word “Arenas”.
The key to innovation, strategy and customer value is the same - the unit of analysis is the context & outcome for the customer (job to be done). When you start with that, whether at the strategy level or business model level you start to see the right opportunities and the right competitors who are solving the “job”.
What does an arena look like from this point of view.
Lets look at an example.
When you go to a hardware store to get a drill, you are thinking of the hole you can make to put in a screw. The point of the screw is to hang a painting. That “hanging a painting” is the job to be done.
If the focus is on “hanging a painting” - that becomes your Arena. You can add more context to it thinking about all the other things you would like to hang. It can become richer by thinking of contexts in which you want to hang but can’t use a drill e.g.renting. Now, it starts to provide a rich source of understanding about the customer that is useful for innovation and strategy.
If you want to compete in this “hanging something to a wall” arena, what do you do?. If you have capabilities like 3M, you come up with this.
In this new world of competition, the solutions are not necessarily going to come from the same industry, in this case the drill industry. The business models will be different and the nature of competition will be different. The key is to start with people.